Chinese plunge drags down Indian markets, Sensex sheds 533 points

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Mumbai, Jan 7 (IANS) Panic selling triggered by a plunge in Chinese markets, coupled with rising geo-political tensions and upcoming US macro-economic data, dented Indian equity markets during the late-afternoon trade session on Thursday.

This led to a barometer index of the Indian equity markets receding close to its 52-week low. The index was trading deep in the red during the session — down 533 points.

Initially, both the bellwether indices opened on a negative note following a rout in the Asian markets which was triggered by accelerated devaluation of the Chinese yuan, disappointing domestic macro-data and global uncertainties.

Commodity prices, too, plunged as the economy of the world’s largest consumer struggled.

The benchmark Shanghai Composite Index declined by 7.32 percent, which led to a halt in trading, as the circuit breaker mechanism was triggered.

The Chinese markets’ fall impacted other global bellwethers, including the Japanese and Australian indices, which reacted negatively.

A weak rupee and increase in selling activity by foreign portfolio investors (FPIs) also subdued sentiment.

According to data with stock exchanges, FPIs had divested Rs.242.48 crore on Wednesday.

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Market observers pointed out that volumes continued to rise in the sell-off, affirming the weak sentiment.

Stock exchanges’ figures showed that the volumes in cash markets across key bellwether indices were in the range of Rs.20,000 crore from Rs.15,000-16,000 crore a week ago.

Moreover, negative bias was supported by the upcoming US non-farm payroll figures scheduled for release on late Thursday India time. The data can provide indications on future US rate hikes.

Geo-political tensions in the Middle East and North Korea testing a thermo-nuclear device on Wednesday eroded investors’ confidence.

Besides, caution prevailed over the upcoming domestic macro-data on industrial output, retail inflation and the third-quarter earning results which start coming in from January 12.

However, markets seemed to have ignored the positives, especially the release of latest FOMC (Federal Open Market Committee) meeting minutes which indicated that the US Fed might delay another round of rate hike.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) shed 533 points, or 2.10 percent.

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Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading deep in the red. It was lower by 172 points, or 2.22 percent at 7,569.40 points.

The Sensex of the S&P BSE, which opened at 25,224.70 points, was trading at 24,872.98 points (2.55 p.m.) — down 533.35 points, or 2.10 percent from the previous day’s close at 25,406.33 points.

The Sensex touched a high of 25,230.35 points and a low of 24,858.22 points in intra-day trade.

The Sensex closed the previous session on January 6 down 174 points, or 0.68 percent, while the Nifty was lower by 44 points, or 0.56 percent.

Nonetheless, the S&P BSE market breadth favoured the bears — with 2,189 declines and 636 advances.

“The fall of Chinese markets has battered sentiments and spooked investors. With no fresh positive triggers investors have gone in for panic selling,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

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“Global markets have reacted negatively to the Chinese markets fall. There has been a further plunge in commodity prices, as the world’s largest consumer struggles,” he added.

Nitasha Shankar, vice president for research with YES Securities, elaborated that Indian markets were testing their 52-week low amidst panic selling in the global markets.

“Broader markets are witnessing sharp corrections underperforming the headline indices as profit booking is seen across the board,” Shankar noted.

“All sectorial indices are trading in the red with cuts in excess of one percent. PSU banks, auto, metals, reality and energy indices are down more than three percent in trade,” she added.

Sector-wise, automobile, capital goods, banking, healthcare and oil and gas indices stocks came under selling pressure.

The S&P BSE automobile index plunged by 645.63 points, capital goods index plummet by 466.88 points, banking index receded by 427.58 points, healthcare index declined by 312.36 points and oil and gas index edged-down by 253.03 points.

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